Shenzhen Blog

Marketing and Branding in the AI-future

From limited production to mass production of goods is what characterized the first three industrial revolutions. Initially, the focus was on increasing the units produced and thereafter, it shifted to ‘improving’ the quality. Schumpeter’s dynamic competition (quality and innovation oriented) came to the center stage and conventional static competition (price-oriented) had to go to the back seat. Price matters but quality is considered to be more relevant in modern markets. Though it is difficult to show why quality does matter over pricing, the contemporary economic structure relies more on the notion of ‘quality’ and same is reflected in the consumers’ behavior that is practically conditioned by aggressive and more nuanced marketing strategies because of huge money that is pumped into branding.

Technological advancement allowed manufacturers to vary the quality of various products. An important feature of modern marketing is increasing the choices, even if ostensibly and not in real sense, and then leverage that to charge more prices. For example, the better looking fruits might not be as nutritious as the ripe but not so good-looking in appearance. However, the market normally charges more prices for the fruits that looks better than those that are essentially nutritious and nothing else. With varying qualities, marketing and branding became more important not only in protecting investments, ensuring sufficient or increasing returns thereto and distinguishing the manufactures (or, rather brands) but also in helping customers to associate a particular quality with a particular brand. It is immaterial whether consumers are really able to identify characteristics of the quality standard under consideration, it is enough that they consider quality of a particular product its peculiar feature. In other words, for consumers, quality comes from the branding and not from the product itself; and, the main reason for this is that current marketing focuses on the brands that are distinct and not on products that might be generally homogenous to a large extent.

Explaining the aforementioned a little further, if one closely analyses marketing and branding, it banks not on utilitarian aspects of the products but on the recognition-oriented aspects of products that could be essentially same but come from different manufacturers. This dynamics operate on the principle of ‘grouping’ or ‘association’ in the sense that people pay attention to the brand they want to associate themselves with. However, this feature of marketing and branding is not likely to persist in the wake of artificial intelligence oriented future. Why?

The algorithms are shifting the focus from society to individualistic behavioral patterns. Every individual will be able to get tailor-made products. The scale of productions, in the conventional sense, focus on the homogeneous production to some extent. In AI-future, where production capacity will tremendously increase not only in terms of quantity but also in terms of heterogeneity, product will come to the centre stage and there will be now notion of ‘quality’. How? Because the products will be highly utilitarian in nature to the extent that they will suit, in principle, only to the person that would be made for and the notion of “association” function that branding and marketing give rise to will have to fade out for there will be no commonality between two users of a product in terms of its quality.

In closing, the increasingly micro-nature of future production leaves no scope of group-based or association-oriented marketing. Also, quality will not be perceived the way it is perceived now because though products will reflect heterogeneity in the sense that they will be exclusively made for the consumer, the general production methods will be homogenised. Either branding or marketing will evolve into something else which is not yet know by changing its basic traits or it will be obsolete as those in the field.

Paramjeet holds an LL.M. from MIPLC, a union of Max Planck Institute of Innovation and Competition (Germany) and the George Washington University (USA). His academic background reflects institutions like University of Oxford (England) and WIPO Academy (Switzerland). In addition to being a qualified lawyer with an extensive experience, he is an invited lecturer at Tbilisi State University and University of Georgia where he teaches EU Intellectual Property and Competition Law, and International Investment Law. He is currently pursuing his PhD in corporate laws at the Institute for European Studies and regularly write for Qrius/The Indian Economist. He founded Inkstone (Policy and Legal Advocacy) and has his research articles published in international academic journals including OUP's JIPLP and Sweet & Maxwell's EIPR. He was recently invited by New York based Institute of New Economic Thinking to present his paper on how law shapes economic reality at Festival of Economics (2018) in Italy. His areas of interest include law, business, economics, AI, philosophy, psychoanalysis and linguistics.